Ladies and gentlemen, thank you for standing by and welcome to Franchise Group's fiscal 2022 first quarter conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. During the question and answer session, if you wish to ask a question, please press zero, then one on your touchtone phone. I'd now like to hand the conference over to your host, Andrew Kaminsky, Executive Vice President and Chief Administrative Officer of Franchise Group. Thank you, Richard. Good afternoon, and thank you for joining our conference call. I'm on the call with Brian Kahn, Franchise Group's President and CEO, and Eric Seeton, Franchise Group's CFO. Before getting started, I'd like to mention that certain matters discussed in this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by the forward-looking statements. The forward-looking statements are made as of the date of this call, and except as required by law, Franchise Group assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For more detailed discussion of these and other risks and uncertainties that could cause Franchise Group's actual results to differ materially from those indicated in the forward-looking statements, please see our Form 10-K for the fiscal year ended December 25, 2021, and other filings we make with the SEC. The financial measures discussed today include non-GAAP measures that we believe investors focus on in comparing our results between periods and among our peer companies. Please see our earnings release in the news and events section of our website at franchisegrp.com for reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from, as a substitute for, or superior to GAAP financial information. We include it because management believes it provides meaningful supplemental information regarding our operating results when assessing our business and is useful to investors for informational comparative purposes. The non-GAAP financial measures the company uses have limitations and may differ from those used by other companies. Now I'd like to turn the call over to Brian. Brian? Thanks Andrew, and good afternoon, and thank you all for joining us. I'll provide a general update before turning the call over to Eric to provide financial details. We'll then be happy to answer questions. First of all, I'm extremely proud of Franchise Group's overall performance in the first quarter. Our financial performance persevered despite consumer headwinds driven by spikes in interest rates and energy costs, as well as the other obstacles like supply chain constraints and general cost pressures on wages and products that have persisted for some time now. FRG's diversification across various discretionary and non-discretionary products and services continue to serve us well. Our diversification is a matter of capital allocation decisions that we can control over time. The real heroes within FRG are A-plus management teams who live in the trenches and who seem to compete with each other to see who can be the most nimble and adapt most rapidly to changing environments in order to produce the most reliable cash flows for us. I can't stress enough how important our management teams are to FRG. We have some of the best partners in the world running our brands, and it's their collective success that's allowing us to gain momentum with all of our stakeholders as we continue to diversify and scale FRG through strategic internal and external investment opportunities. Within FRG, our home furnishings business has seen wider variability of financial performance than our other businesses, as cost pressures have been higher there to the tune of over 25%, and that's driven higher prices to our customers. Unit sales have been lower, fairly consistent for over a year now, partly due to the high demand during COVID and partly due to price increases that ultimately price out the marginal customer each step of the way. Demand for health and wellness, pet, and educational services and products have seen far less variability. Within FRG, these businesses also happen to be the least discretionary and have the least amount of cost pressure and pricing variability. That said, across all of Franchise Group, we estimate our freight and logistics costs are running in excess of $100 million more than they will in the steady state. As these cost excesses subside, FRG and our franchisees and dealers stand to be significant beneficiaries. While we don't expect any immediate gratification, we do believe that recent consumer headwinds are likely to catalyze a quicker return to equilibrium sooner than we thought on our last conference call. Moving to the first quarter results, I'll start with a quick recap of our home furnishings businesses. In the first quarter, system-wide, Buddy's had negative same store comp of - 1.6%, with franchisee comps declining 2.2% and corporate stores growing 1.6%. Buddy's opened 10 new franchise stores in the first quarter, ending with 323 stores operating under the Buddy's banner. Buddy's also awarded 12 new area development agreements in the quarter, increasing its backlog to 102 franchise locations. Badcock comped down - 4.5% for the first quarter. We're in the process of transitioning away from Badcock's in-house credit program in favor of adding several new and enhanced payment options from our trusted third-party partners. We have excluded the traditional profitability of the credit business from our non-GAAP results. During the quarter, we entered into a series of real estate transactions at Badcock. We've closed one, generating gross cash proceeds of $94 million, and we've signed definitive purchase and sale agreements for Badcock's distribution centers, corporate headquarters, and other real estate for a combined more than $170 million of additional cash proceeds. The majority of the Badcock real estate transactions are expected to close in the current quarter, and combined with the $400 million of consumer receivables sold in December, all of these transactions will bring our gross proceeds from the sale of non-core assets at Badcock to over $660 million since we closed on the purchase of Badcock for $580 million last November. American Freight comped down 6.4% for the quarter. American Freight opened two net new company-owned stores in the quarter, bringing total store count to 369 units. We continue to be very optimistic about the growth prospects for American Freight franchising. We expect that franchisee demand will continue to increase when the American Freight ecosystem normalizes. In its first full quarter with FRG, Sylvan performed well and delivered positive comps of over 16%. Sylvan opened three new locations and sold three new franchises. We continue to work with the Sylvan team on accelerating franchise growth and are starting to see traction in that process. Yesterday in Baltimore, Sylvan concluded its first in-person franchise convention in three years, and you could feel the excitement among the Sylvan management team and its franchisees. It's a wonderful combination when you can offer franchisees a chance to provide a service to their communities while also generating a profit for the privilege. Sylvan operates 563 physical centers today and over 700 total locations, and we expect that count to grow substantially over time. Pet Supplies Plus generated system-wide same-store sales comps for the first quarter of + 8.5%. Franchisee comps grew over 10% in the quarter, while corporate stores grew 5.7% for the quarter. PSP continues to accelerate its growth in brand building with 19 new store openings and the sale of 21 new franchise area development agreements in the first quarter, bringing total backlog at PSP to 216 locations. PSP's acquisition of Wag N' Wash is off to a successful start, and it's been well-received by customers and franchisees. We believe that Wag N' Wash will be an attractive opportunity for franchisees to add smaller, more focused stores within their geographies, and that this second concept will complement existing PSP footprints and provide franchisees new market opportunities for both. The Vitamin Shoppe comps were positive 6.1% for the first quarter due to continued increases in store traffic and growing customer interest in its health and wellness products and services. Direct-to-consumer revenue accounted for over 25% of the business in the quarter. Franchising continues to build momentum at The Vitamin Shoppe as well, with 12 stores now in backlog, and we see growing interest from franchisee candidates as evidenced through Discovery Day attendees. Before I turn the call over to Eric, I just want to reiterate how impressed I am by our management team. They collectively are great stewards of our capital, and they're the driving forces behind Franchise Group's opportunities to invest internally and externally as we continue to diversify and scale our business. Once again, I'd like to thank all of our dedicated associates for their tenacity and for their support of each other, their support of our franchisees and dealers and ultimately, the success of Franchise Group. Eric? Thank you, Brian. Before I address the results of operations, I would like to remind you that we will be making many references to pro forma items throughout this call. Our press releases and filings may refer to historical financial results for the acquired businesses prior to their acquisition by Franchise Group. These items have been adjusted to align to our fiscal calendar and accounting policies to the extent reasonable. Comparison to pro forma results will allow us to discuss and evaluate performance of the acquired companies when a comparable period is not available due to the timing of the acquisition. For the first quarter of 2022, total reported revenue for Franchise Group was $1.1 billion, and income from continuing operations was $12.3 million or $0.25 per fully diluted share. Adjusted EBITDA was $112.3 million, and non-GAAP EPS was $1.29 per share. FRG's overall financial results include the financial results of all acquisitions from the date of acquisition. In the first quarter, all six business segments were fully included in our results and are detailed in our press release and filing. As Brian mentioned, we are in the final stages of transitioning customer financing at Badcock from in-house to third-party partners. Since this business is being transitioned and is non-core for FRG, we excluded the results of the finance business from Adjusted EBITDA and non-GAAP EPS. We ended the quarter with approximately $1.3 billion in outstanding term debt. The outstanding term debt balance does not include repayments from the net proceeds of the $94 million sale of the Badcock Corporation real estate portfolio, which closed on March 31, 2022. We anticipate the two pending Badcock real estate sales close by the end of our second quarter and will allow us to repay at least the $175 million balance of Badcock acquisition financing, as well as add approximately $20 million of cash to the balance sheet. At the end of the quarter, we had approximately $63 million of availability on our ABL revolver and cash of approximately $149.6 million. In conjunction with our balance sheet and business performance, we believe we have sufficient liquidity to continue to meet all of our obligations and support all of our businesses for the foreseeable future. As of today, we are reaffirming our previously announced financial outlook for fiscal year 2022 of revenue of approximately $4.45 billion, Adjusted EBITDA of approximately $450 million, and non-GAAP EPS of approximately $5 per share. Due to the success of the sale of Badcock Real Estate, we believe net debt will be below $1.1 billion by the end of fiscal year 2022. The company is using approximately 41 million weighted average shares outstanding. Our outlook does not include any assumption for additional acquisitions, divestitures, or refranchising activity. I wanna thank all of our shareholders and lenders for their support to date. Operator, please open the line for questions. Thank you. Thank you. We will now begin the question-and-answer session. If you have a question, please press zero one on your touchtone phone. If you wish to be removed from the queue, please press zero two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero one on your touchtone phone. We're standing by for questions. Our first question on the line comes from Mr. Mike Baker from D.A. Davidson. Please go ahead. Thanks, guys. A couple questions. One, can you put the first quarter in context to your own expectations? Your numbers were ahead of consensus, but how does that compare since you don't give quarterly guidance? Just wondering how it compared to how you expected the first quarter to come in. Then related to that, as you think about the full year, you have reiterated your guidance pretty much to a T, but the environment today is a lot different than it was three months ago. Are you more confident, less confident? Are there different drivers within that, you know, no change in the guidance? Again, a lot's changed, so just wondering how you're thinking about the business today versus three months ago. Thanks. Sure. Thanks, Mike. S o I'd say within the business, we obviously have several businesses. Some of the businesses were, you know, marginally stronger than we might have thought three months ago. Some would be marginally weaker, but all in all, we are where we are, and we're very happy to be where we are. As far as what's changed over the last couple of months, I think that we're paying attention to everything that's going on. I definitely think that we've seen energy prices, gas prices spike. That's traditionally been, you know, cash out of pocket for many of our consumers that they have no choice but to spend, and that takes away discretionary income for them to use in some of our stores. A ll in all, it's been fine. Traffic has continued to be about what we thought that it would. You know, I'd say that the main differences today versus where we were three months ago would be I didn't really see what the catalyst would be that would snap things back more into equilibrium. Now, I think I feel better that we can see the light at the end of the tunnel because the consumer generally is challenged. A s that demand is lower, it actually solves the supply chain issues to one extent. It solves ultimately the pricing issues that we're seeing. You know, we're seeing container costs down in some places over 50% from the peak already. Although that takes time to flow through the P&L, I think that that's a very different trend than we've seen over the last couple of years. I think as long as we can continue to hold down the fort doing exactly what we're doing, we feel great. On the other side, I think we're gonna be a huge beneficiary of just something going back to normal. Yeah. Interesting perspective. Thanks. If I could ask one more, just as it relates to the balance sheet and getting to below $1.1 billion in net debt by year-end. I assume that includes, within that debt calculation, the current installments, which I think is around $488 million right now. Assuming it does, your net debt today is about $1.6 billion, so you gotta pay down another $500 million. The things you're selling, you'll get $268 million. I guess where's the other, you know, roughly $250 m illion come from? Is that free cash flow? I'll let Eric come in over the top if I say something he doesn't like. That, at current installment, we still got this securitization from what we sold to B. Riley, all of those receivables. It's an accounting issue. It's not. I mean, I hate to say this is not actual debt, but it's not actual debt. We don't actually owe that money. You know, we weren't able to qualify for an accounting sale, so until we stop doing certain things operationally, that has to appear on our balance sheet. I'm sure I mucked that up pretty well, but that's not actual debt that we owe anybody. No, definitely. Does that make sense? Yeah. Well, to follow up on that then, okay, so that's not included in that calculation. I guess question would be, when does that come off the balance sheet, if at all? Because I assume if you just do a screen or pull up Bloomberg, that's gonna show up as. It might show up as debt. I guess I don't know, but it could. Yeah. It's actually driven by how we run the Badcock operations. When we stop doing certain things, it's going to just disappear. I don't really wanna get into what those things are because it's just business. It's not actually financial. It's not financially driven. It's just an operating variable. How about that? Fair enough. Is it something that is coming off in the foreseeable future, or is that just gonna be there? When you say you gotta do something? Is that something that you're currently? Planning to do? Yes. It'll go away relatively quickly. Yes. Thank you. Appreciate that. Thank you. No problem. It's a good question. Frankly, we didn't think it would be there in the first place, so it's a very good question. Thank you. Our next question comes from Susan Anderson from B. Riley. Please go ahead. Hi, good evening. Thanks for taking my questions. I was wondering if maybe you could talk a little bit about the speculation that's been out there that you potentially could be a purchaser of Kohl's. Maybe if you could comment on that at all, whether or not that's an asset that you would be interested in. S ure. Thanks, Susan. I'm not going to comment on any particular companies and that would include Kohl's, but I'm happy to talk to you about FRG and, you know, tell you. You know, I can't tell you what we're going to do in the future, but I can tell you, I think, a lot about our philosophy when it comes to M&A and, you know, things that we look at from time to time. You know, first, we got a lot of conviction in the brands that we operate now. We v ery strongly believe that these brands that we operate will give us significant organic growth over time and also generate enough free cash flow to support a healthy and growing dividend, and also additional free cash flow that we can reinvest both internally and externally in M&A. We don't have any interest in putting that at risk for any transaction, you know, just period. We're not going to, you know, mortgage the farm to do any one transaction. You know, we look at everything that's available. You know, some things make sense, some things don't make sense. You know, any transaction of size certainly would need to be significantly accretive to FRG earnings per share and cash flow per share. You know, and I think you can also imagine, as wonderful as our lenders are, you know, we do have capacity constraints regarding capital and, you know, large transactions would certainly have to be just over the top positive for FRG, in my personal opinion, to tie us up. Money doesn't grow on trees. I think we've talked about, you know, many times on these calls how, you know, we analyze the opportunity cost of things we may not be able to do because of the transactions that we do undertake that tie up our balance sheet from time to time. Look, I think management for us is always a key. I think you heard me talk about management a little bit ago of the businesses we have. You know, we have really investable management teams at Franchise Group. W hether we do very small transactions or very large transactions, management is always going to be a key to what we're looking for. I think that's just, you know, some background more, I think, on us. FRG and what we look for, maybe without, you know, directly answering your question. Hopefully that's helpful. Perfect. Yeah, that's really helpful. I guess just to follow up on that, though, would it ever make sense and maybe, you know, not even necessarily with Kohl's, but just any other large purchase where you potentially, you know, it'd be difficult to finance if you would ever issue equity to make that purchase? Also maybe if you could just talk about, you know, now if you feel like you are in the position with most of that term loan paid down, to look for other new acquisitions and if you're seeing increased opportunities out there too? Thanks. Yeah. In reverse order, absolutely, we do believe that, you know, this could be a really good time for us, assuming the capital markets are cooperative, to be transacting. We have reduced our leverage. We're going to reduce it further shortly. There are definitely some wonderful assets out there, you know, managed by wonderful management teams that we would love to partner with, given the opportunity. As far as, you know, issuing equity generally, it's highly unlikely that, you know, we would issue equity, you know, anywhere near the current FRG valuation for M&A purposes. I think it would be, you know, very difficult to find something that makes sense. I think there are other ways to structure transactions that hopefully would not, you know, require us to do that if there was a large transaction, but that is not something that we have an appetite to do. Okay, great. Did I get them all? Yeah, go ahead. Yeah, I think you did. Yeah, that's really helpful. Thanks. If I could just add or ask one more question. Just, you kind of talked about it a little bit, but just on the consumer trends that you're seeing, it sounds like, you know, for like a, American Freight, there is maybe some slowing, which you feel like is partly because the pull-forward, but then partly maybe because of inflation and, you know, just consumers pulling back. Is that the case? I guess just given your unique view over so many different product categories, i t doesn't sound like you're seeing similar trends in, you know, the more, staple-like products like Pet Supplies Plus and Vitamin Shoppe. I just wanted to see if there's any other consumer trends that you could call out that have kind of changed from last quarter. Sure. Look, I think last quarter on the last conference call, we talked about what was going on in the home furnishing segment. I think I said then that we've seen, you know, units down significantly for well over a year now. It's probably, you know, a year and a half. You know, so what we see is higher pricing, but one, higher cost, two, higher pricing, but then three, you know, a large decrease in the actual units that are moving, and we've seen that for quite some time. So the revenue seems relatively stable, but there's not as much activity as you would normally see. So that's not changed. I would say that as far as the, you know, the business itself today on this call versus where we were three months ago on the last call, it hasn't actually gotten worse in my view. It's just not getting any better. You know, you do have higher costs that are rolling in. They just roll through the P&L. Now as the cost pressures do subside, and I really do think that they will, you know, to some extent, it's not getting worse. That's just going to take several months to roll through the P&L as well. It's, again, it's not. There's no real change. It's just what we've been living with and it's not gotten worse. On the education side, the pet side, you know, health and wellness, the businesses not seeing quite as much inflationary pressures, although their management teams all feel like they're fighting on a daily basis against inflationary pressures. You know, from my view, it's all relative to some of the other businesses that have been dealing with far greater inflationary pressures for some time. I think that even though we don't do any business over in Ukraine or Russia, I do think that that period of time when war broke out just spooked people. I think that that marginal customer may have just done nothing. You know, all in all, it worked out okay for us. Thank you. Our next question online comes from Mr. Ian Zaffino from Oppenheimer. Please go ahead. Hey, good afternoon, guys. This is Isaac Sellhausen in for Ian Zaffino this evening. Congrats on a strong start to the year so far. I guess my two questions, the first one relates to like sort of what was asked previously just on Pet Supplies Plus, and with Vitamin Shoppe. It's obviously seen strong comps in the first quarter and it's been trending that way for the last few quarters I guess. I guess as you look out through the year, I know you don't give specific guidance for the segments, but just curious if you think those strong comps can hold up throughout the year, as you look at the health of consumer, I guess. We don't forecast comps by brand, but obviously appreciate the question anyway. I think I can say that, you know, our plan certainly does not include robust comps in those businesses. You know, we would not expect the same level of comp activity across the board. Maybe that's a safe way of answering a direct question. Okay. Got it. Yeah, appreciate it. Sure. I guess, correct me if I'm wrong, but I know in the past you've said, I guess you guys believe you can achieve some synergies between American Freight, Buddy's and Badcock. I guess if you could provide sort of a general outline of those kind of synergies and sort of the timeline around that, it would be helpful to frame if you expect that to be this year or a little more longer- term. S ure, no problem. I do think that you're right, we do expect that we'll be able to achieve benefits of having a larger scale in the home furnishing segment. We have not factored in any, you know, synergies during this year to our thinking. I think that's more longer- term. I think a lot of it has to do with vendor relationships and, you know, whether or not, you know, we're able to successfully get the vendors to look at the American Freight, Badcock, Buddy's and anything else that we may add to the home furnishing segment over time as just Franchise Group and that relationship and whether or not we're able to drive better pricing. A very small benefit in pricing has a very large impact on overall profitability. I think as we become more meaningful to our vendors and they are looking at us on a macro level rather than just a micro level, I think that there is a significant profitability to add to the system. I'd say that's certainly the largest candidate. You know, we don't expect to be, you know, running, for example, Buddy's, Badcock and American Freight out of one office. It's not about that. It's not about, you know, headcount or, you know, corporate cost savings. It's far more operationally driven. Okay. You know, another example would be, you know, the way that we provide payment options to customers, you know, providing additional volume to similar vendors, you know, can have advantages as well across the system. You know, again, all operational and not really just, you know, corporate structural. Okay. Got it. Makes sense. Just circling back quickly to sort of the M&A discussion before. I mean, given that leverage will obviously come down to the end of the year, and obviously with the EBITDA growth throughout the year, I guess, are there certain areas of the business that you'd be more open to doing M&A? Just maybe your general comments around that. Sure. Look, I think that we have a goal to diversify, which would mean, you know, adding business lines that we aren't currently in if we think that they make sense and they're a good fit for Franchise Group over the long- term. We also are interested in investing in the businesses that we have. Yes, you know, Wag N' Wash is a great example, very small acquisition, but provides a whole second concept to PSP, and that's wonderful. You know, Badcock added scale to the home furnishings segment and, you know, it's a wonderful transaction for us. You know, we're not against adding exposure to businesses that we feel comfortable with overall. Look, most of our time is spent, you know, looking at new avenues, new verticals that, you know, we can build around over the long- term as well. It's every trade it takes two. We've always said that we can find. There are a lot of businesses we'd love to own and we can price businesses that we would like to own, but that doesn't mean that the counterparty is going to be interested in selling them for the valuation that we think makes sense for Franchise Group. You know, we're not going anywhere, hopefully. You know, sometimes, you know, people change their minds and we're here. I think we've gradually moved from people saying, you know, "Who the heck are you?" to, "Okay, you know, we've seen what you've done and, you know, you're a viable partner, and let's figure out if there's a way to make a transaction." That's the momentum that we'd like to sustain. Okay. Awesome. Well, thanks very much. Of course. Thank you. Once again, for any questions, that's zero then one on your touch-tone phone. Okay, it looks like we have a follow-up from Mr. Baker. Please go ahead. Real quick. I hate to be short- term focused, but you know, again, so much is going on in the economy in the last few months it seems like. Care to comment on any trends, you know, throughout the quarter and then into the beginning of the second quarter? In other words, you know, how is March and April versus January and February just as an indication of what might be going on in the economy? Thanks. I don't realistically comment on the monthly variations. It depends which business you're comparing it to. You know, I think that the way I would have you understand what we're seeing holistically is that when you combine all of those variations, the things that are better, the things that are not as good as what we would have expected, when you blend it all together, you know, we're right where we thought we would be. Thank you. We have no further questions at this time. I'd like to turn it over to our presenters for closing remarks. Great. Well, thank you all for joining us this afternoon, and operator, you can please conclude the call. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. Speakers, please stand by for your debrief.